[Another dive back into the archives begins today and, after all the recent news about housing and the latest efforts by the White House and the Federal Reserve to help this market, a look back at the old blog from five years ago - back in the fall of 2006 when it was just starting to become clear that we could have some major problems - seemed like a good idea. First up is an item originally published on September 27th, 2006 that provides a good setup for what will follow in the days ahead.]

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To some, Monday’s report from the NAR (National Association of Realtors) containing news of declining home prices was barely noticed. To others it was quite an event.

In some parts of the country, home prices have been declining since the peak last fall, in certain areas quite dramatically. In other parts of the country, prices are still rising, albeit moderately.

But now that the national figure for the year-over-year change in median home price has gone negative, this seems to be some sort of seminal event. The network evening news gave this an unexpected amount of attention, as did many local and online news organizations.

Even a day or two later, many people are still talking about it, and with prices of new homes dropping by a similar amount as seen in today’s report, even after the thousands of dollars in incentives for each sale, more headlines about home prices are sure to be offered.

It’s enough to give you the jitters.

(more…)

Standard & Poor’s reported that home prices were about flat in August and, since I hadn’t gone to the trouble of preparing the chart below in almost a year, I figured I’d give it a try. Now I know why it’s been so long – getting all the labels arranged properly is quite the pain.

But, it does show what’s been going on with the U.S. housing market quite well as areas that were the source of the housing bubble and its subsequent collapse continue to do better than just about anywhere else (note that the labels are arranged from top-to-bottom in the same sequence that the corresponding curves end at the right).

Overall, home prices were up 0.2 percent in August and, when seasonal adjustments are taken into account, prices were flat for  an amazing fifth straight month. Of course, in the nation’s capital, home prices continue to rise, up 1.6 percent from the month prior and one of only two cities with year-over-year gains (basket case Detroit was the other).

The latest data for the Case-Shilller Home Price Index will be released in just a little while, but, in the mean time, this segment on PBS Newshour last night about the luke-warm reception for President Obama’s latest housing initiative is worth a look.

That Las Vegas street the President visited has some pretty shocking home price numbers, that is, for anyone who doesn’t live there, one property value falling from $210,000 in 2007 to under $70,000 in a sale earlier this year. It looks like U.S. government backing of a $200,000+ mortgage on a property worth one-third that amount is what we’ve come to…

Here’s an interesting take from north of the border on the latest initiative by President Obama to aid an ailing housing market, a move that is already seen as being underwhelming if a speedier recovery is the goal. From this item at the Globe & Mail comes the following conclusion about why the latest plan is not much bolder than the last one:

From the beginning, the biggest barrier to doing something for the many millions of homeowners drowning from the financial crisis is the many more millions who found ways to stay afloat.

At least three times during their call with reporters, Messrs. Donovan and Sperling emphasized that the changes the president was making were targeted at homeowners who “have done all the right things” and have “met their obligations.”

There are a plethora of plans from economists that would more effectively and quickly solve the U.S. housing crisis.

However, heading into an election year, the White House has little incentive to risk a backlash from a large majority of homeowners who are making their payments and might resent the idea of their tax dollars being used to bail out a neighbour who they assume simply took on more house than she could afford.

That might be the right political call. But as a result, housing will continue to be a drag on the U.S. economy in 2013.

Well, anything will be an improvement over HAMP (Home Affordable Modification Program) where borrowers got a lower interest rate and lower payments on their first mortgage but were still saddled with debt loads that clearly set them on a path back into default (median debt-to-income ratios of over 60 percent).